Existing-home sales fell in January but are above year-ago levels, according to the National Association of Realtors®.

Existing-home sales - including single-family, townhomes, condominiums and co-ops - dropped 7.2 percent to a seasonally adjusted annual rate¹ of 5.05 million units in January from a revised 5.44 million in December, but remain 11.5 percent above the 4.53 million-unit level in January 2009.

Lawrence Yun, NAR chief economist, said there is still some delay between shopping and closing that affected current sales. “Most of the completed deals in January were based on contracts in November and December. People who got into the market after the home buyer tax credit was extended in November have only recently started to offer contracts, so it will take a couple months to close those sales,” he said. “Still, the latest monthly sales decline is not encouraging, and raises concern about the strength of a recovery.”

“Activity should be picking up strongly in late spring as buyers take advantage of the tax credit, which is critical to absorb distressed properties reaching the market and to continually chip away at inventory,” Yun said. “With a downtrend in the number of homes on the market, especially in the lower price ranges, values are beginning to firm but with great variance around the country.”

A parallel NAR practitioner survey⁴ shows first-time buyers purchased 40 percent of homes in January, down from 43 percent in December. Investors accounted for 17 percent of transactions in January, up from 15 percent in December; the remaining sales were to repeat buyers. The survey also shows that buyer traffic increased 9.4 percent in January.

NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said buying a home in the current environment has become more challenging. “First-time buyers and others who need a mortgage are increasingly losing out to all-cash investors for the best bargains in many areas, particularly for foreclosed homes where cash is king,” she said.

“Inventory conditions vary by price range, and of course there are major differences depending on location. Realtors® are the best buyer resource for strategies on winning bids in increasingly competitive markets,” Golder said. “The bidding for more desirable homes will only accelerate between now and the April 30 contract deadline to qualify for a tax credit of up to $8,000.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage edged up to 5.03 percent in January from 4.93 percent in December; the rate was 5.05 percent in January 2009.

Regionally, existing-home sales in the Northeast fell 10.9 percent to an annual pace of 820,000 in January but are 22.4 percent above a year ago. The median price in the Northeast was $245,300, a gain of 8.8 percent from January 2009.

In the South, existing-home sales dropped 7.4 percent to an annual pace of 1.87 million in January but are 12.0 percent above a year ago. The median price in the South was $140,200, down 2.0 percent from January 2009.

In preparing an offer to purchase a house, you should already know the seller’s asking price. But deciding on what price to offer and how to come up with a fair offer is next?

Deciding on an offering price:

Find recent sales of similar properties to come up with an offering price range. Then analyze additional information such as the condition of the home, any improvements made to the property, current market conditions, and any circumstances the seller may be facing. This should help decide a price that you believe might be fair to pay for the home. Lastly, depending on your and your agent’s negotiating approach, adjust for a fair price and come up with what you may want to offer.

Using Comparable Home Sales:

In determining a price you are willing to offer, look at the recent sales of similar homes, in similar neighborhoods. Doing this is called using “comparable sales.” Comparable sales are recent sales (6 months or less) of homes that compare most closely to the one you are looking at. Compare prices of homes that are similar in total square footage, number of bedrooms, bathrooms, garage area, land size, and type of construction, etc.

There are numerous sources of information on comparable sales, all of which are available by your real estate agent. It is difficult for the general public to access this information and in some cases almost impossible. Two of the most apparent information sources for finding comparables are public records and the Multiple Listing Service (MLS).

Although the economy has been growing lately, fallout from the recent recession continued to negatively impact commercial real estate sectors in the fourth quarter, but there is hope for some improvement next year, according to the National Association of Realtors®.

Lawrence Yun, NAR chief economist, said commercial real estate almost always lags the economy. “Because of the lingering impact from the deep recession over the past two years, vacancy rates will trend higher and many commercial property owners will need to make rent concessions,” he said.

“With the job market expected to turn for the better later this year, we’ll see rising demand for office and warehouse space, but that isn’t likely before 2011,” Yun said. “At the same time, improved consumer confidence would help sustain the retail sector and encourage more people to enter the rental market.”

Yun notes that commercial vacancy rates remain high in most market areas and are depressing rents.

The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, an attitudinal survey of more than 700 local market experts,¹ suggests a flattening level of business activity in upcoming quarters with 55 percent of members expecting the market to improve in the second quarter.

The SIOR index rose 0.2 percentage point to 35.5 in the fourth quarter, compared with a level of 100 that represents a balanced marketplace. This is the first gain following 11 consecutive quarterly declines. Although some indicators show that a decline in commercial property values is beginning to flatten, 86 percent of respondents report prices are below replacement costs.

Nearly nine in 10 survey participants said new commercial development is virtually nonexistent in their market areas, and rent concessions are reported almost everywhere.

An independent survey earlier this month showed a couple dozen banks are willing to expand commercial credit this year, which is critical. The lending expansion is aided by the Federal Reserve’s Term Asset-Backed Loan Facility, which is encouraging issuance of commercial mortgage-backed bonds. In addition, regulators are prodding lenders to extend terms for many existing commercial loans.

“We have a long way to go for satisfactory levels of commercial credit, but these are important first steps,” Yun said. “Given that about $1.4 trillion in commercial debt will come due over the next three years, more extensive action is needed and the Fed needs to more actively help resuscitate commercial mortgage-backed securities. The credit improvement will mean more commercial property sales in 2010, even some at deeply discounted prices.”

Looking at the overall market, commercial vacancy rates generally will stay at elevated levels, according to NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK.² The NAR forecast for four major commercial sectors analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors.

According to the most recent Realtors® Confidence Index, buyers continue to be discouraged with the extended short sale process, resulting in foreclosures that could have been prevented. New resources from the National Association of Realtors® aim to help Realtors® and consumers successfully navigate the short sale process to help more homeowners avoid foreclosure.

“Our members report that short sales are often riddled with delays and red tape,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “As the first, best source for real estate information, Realtors® are dedicated to help streamline and improve the short sale process for both buyers and sellers. NAR has worked tirelessly to provide Realtors® with the resources they need to navigate short sale transactions, as well as provide guidance on helpful government programs designed for homeowners facing the process.”

On April 5, 2010, the U.S. government will implement the Home Affordable Foreclosure Alternatives Program. Part of the Home Affordable Modification Program, HAFA helps homeowners who are unable to retain their home under HAMP by simplifying and streamlining the use of short sales and deeds-in-lieu of foreclosures. Homeowners must meet certain requirements to participate and incentive payments are provided to homeowners and servicers.

To help Realtors® understand HAFA and its guidelines, NAR has released a brochure about the Home Affordable Foreclosure Alternatives Program and additional resources online, including government forms and guidelines, a video explaining the new federal guidelines, and frequently asked questions. Designed to help Realtors® explain the new program to homeowners, NAR’s HAFA resources explain how the program aims to streamline short sales and, in the process, save more families from foreclosure.

“The new guidelines and incentives as part of HAFA are a crucial step towards reducing problems with the short sale process, and Realtors® are ready to help make this new program a success,” said Golder.In addition to its resources on HAFA, NAR launched a Short Sales and Foreclosures Certification Program in August 2009. The SFR program is offered by the Real Estate Buyer’s Agent Council of NAR and includes training on how to manage short sale, foreclosure and real-estate owned transactions.

Strong gains in existing-home sales were the predominant pattern in most states during the fourth quarter, with many more metro areas seeing prices rise from a year earlier, according to the latest survey by the National Association of Realtors ® .

Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.

Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate ¹ of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008. Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.

Lawrence Yun , NAR chief economist, said the first-time home buyer tax credit was the dominant factor. “The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92 percent in the fourth quarter from 5.16 percent in the third quarter; it was 5.86 percent in the fourth quarter of 2008.

In the fourth quarter, 67 out of 151 metropolitan statistical areas ² reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter only 30 MSAs showed annual price increases and 123 areas were down.

The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said.

“Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable,” Yun said.

NAR President Vicki Cox Golder , owner of Vicki L. Cox & Associates in Tucson, Ariz., said near-term market conditions will remain favorable. “Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.

“The biggest issue is for repeat buyers, who will have to accelerate their buying plans if they want the expanded tax credit. Since you must have a contract in place by the end of April, the best advice is to consult a Realtor ® now about qualification criteria and options in your area,” Golder said.

Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.

In the condo sector, metro area condominium and cooperative prices - covering changes in 54 metro areas - showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8 percent from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.

Regionally, existing-home sales in the Northeast rose 11.1 percent in the fourth quarter to a pace of 1.03 million and are 33.6 percent higher than a year ago. The median existing single-family home price in the Northeast declined 5.6 percent to $234,900 in the fourth quarter from the same quarter in 2008, but with widely varying conditions.

“In the Northeast, markets with lower median prices that have avoided wide swings, such as Buffalo, are generally showing consistent price gains,” Yun said. “Even so, some of the higher cost areas are showing signs of stabilization, such as Nassau-Suffolk, N.Y., and Boston.”

In the South, existing-home sales rose 13.8 percent in the fourth quarter to an annual rate of 2.23 million and are 28.2 percent higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4 percent from a year earlier. ”Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.